Trading house Itochu taking on Alibaba and JD.com

Itochu and two partners are investing roughly 7.6 billion yen ($67.6 million) in an e-commerce venture selling Japanese goods to the Chinese market in hope to enhance its own forays into China’s internet sector.

The Japanese trading house is investing around 4 billion yen into the Tokyo-based startup Inagora, with telecom KDDI and financial services company SBI Holdings providing the rest.

Itochu previously invested around 100 million yen in the company and will now hold a roughly 20% stake, making it the second-largest shareholder behind founder and CEO Weng Yongbiao.

Founded in 2014, Inagora operates Wandou, a Chinese-language e-tailer with some 3 million users.

The site boasts around 40,000 offerings, with a focus on cosmetics, clothing and foods from brands including Japanese fashion label Samantha Thavasa, Swiss lingerie maker Triumph International and Japanese food producer Ajinomoto.

China’s cross-border e-commerce market is growing rapidly. The market for goods from Japan is seen nearing 2 trillion yen in 2020. The country’s overall e-commerce leaders currently have a strong grip on the cross-border segment: Top player Alibaba Group Holding commands a roughly 40% share, while second-place JD.com and major internet player NetEase control shares in the 10-20% range.

Itochu has already taken its first step into the cross-border market, launching a high-end site in spring 2017 with Chinese state-owned conglomerate Citic, a major partner.

But the trading house has realized breaking Chinese heavyweights’ grip will require savvy marketing that can respond nimbly to consumer tastes — hence its turn to Inagora, which excels at creating videos highlighting the appeal of Japanese products for local consumers.

The trading house will supply products for Inagora’s site through units including food wholesaling arm Nippon Access and Edwin, Japan’s largest maker of jeans. In addition, Itochu will have the site carry local specialty items from across Japan stocked by convenience store chain FamilyMart, another member of the Itochu group.

Itochu Logistics, with over 100 locations in China, will also cooperate with Inagora, which plans to add warehouses to its own distribution network using money from the latest round of investment.

The startup will also hire more sales staff to encourage companies to list their products. Forays elsewhere in Asia are on the agenda as well: The company plans to bring its business to Taiwan, Malaysia and elsewhere in 2018.

Inagora anticipates around 15 billion yen in transactions this year, six times the 2016 level. With help from Itochu and others, the startup targets 100 billion yen in transactions in 2019 and 176 billion yen a year later.